After trading in the red for five straight weeks, the bulls charged the market into the green on September 1, backed by a robust 7.8 percent economic growth rate recorded for the first quarter of the fiscal year 2023-24, manufacturing PMI scaling a three-month high of 58.6, and auto sales for August zooming to record highs. China’s stimulus measures to boost real estate sector and the economy, and a bit of hope for Fed pausing the rate hike cycle amid improving labour market data also supported the revival in market sentiment. The benchmark indices were volatile with negative bias in first four sessions of the week.

In the week beginning September 4, the market may trade within a range and in consolidative mood with more stock-specific action, given the ongoing momentum in broader markets, experts said, adding that the focus would be on services PMI numbers, US jobs data, oil prices and institutional flow.

The BSE Sensex jumped over 500 points to 65,387, and the Nifty50 climbed 170 points to 19,435 as most sectors, barring FMCG, closed in the green. The broader markets fared much better than benchmarks, with the Nifty Midcap 100 and Smallcap 100 indices rising 2.5 percent and 4.4 percent.

“We expect the market to trade in a range with sector- and stock-specific actions as the broader market momentum remains positive,” Siddhartha Khemka, head – retail research at Motilal Oswal Financial Services said.

Further, in the absence of any major triggers from the domestic market, Vinod Nair, head of research at Geojit Financial Services said the sentiments would be driven by global cues, including the release of US payroll and PMI data.

What could be the major factors that would determine the dynamics on Dalal Street next week? Let’s take a look.

Domestic economic data points

After strong manufacturing PMI data, rising to a three-month high of 58.6 in August (against 57.7 in July), all eyes will be on services PMI data for August scheduled to be announced on September 5. Experts feel the numbers may be lower than July which was reported at 62.3. Composite PMI numbers for August will also be announced on same day.

Further, bank loan and deposit growth for the fortnight ended August 25, and foreign exchange reserves for week ended September 1 will also be released on September 8.

US labour report

Investors around the world will keep an eye on the US labour report next week. The labour market remained resilient so far with non-farm payrolls for August coming in at 1.87 lakh against analyst expectations of 1.8 lakh, though other data points indicating that the economy was slowing down with jobs data for June and July revised downwards, unemployment rate increasing to 3.8 percent in August against estimates of 3.5 percent, S&P Global manufacturing PMI dropped to 47.9 in August from 49 in July, though better than the estimates of 47, and ISM manufacturing new orders coming in at 46.8 for August as against 47.3 in the previous month and expectations of 48.

Hence, most experts expect the Fed to keep the rates unchanged in the policy meeting later this month, while the movement in 10-year treasury yields (closed largely flat at 4.19 on week-on-week basis) and US dollar index (up 0.67 percent to 104.26 WoW) will also be watched by the market participants.

Global economic data points

Here are the key global economic data points to watch out for:

Oil Prices

Experts feel crude oil prices, which snapped two-week losses in the week ended September 11, are expected to remain high in the coming week too. Supply tightness, expectations of likely production cuts, extension by the OPEC countries and allies and China’s better-than-expected manufacturing PMI numbers, along with stimulus measures to boost the economy fuelled the rally last week. The massive draw of 10.6 million barrels in US crude oil inventories for the week ended August 25 also supported the oil prices.

Brent crude futures gained more than 5.5 percent to $88.99 a barrel and WTI crude oil jumped 7.5 percent to $86 a barrel. Market participants will closely watch the oil price move as higher oil prices are always a risk for oil importing countries like India.

Mohammed Imran, research analyst at Sharekhan by BNP Paribas believes crude oil market will remain supportive of the development happening in China along with the supply worries from OPEC+.

FII Flow

Rising US treasury yields and strong US dollar index continued to weigh on the FII flow as foreign institutional investors were net sellers in August to the tune of Rs 20,621 crore in the cash segment, after significant buying in previous three months. Experts feel the FIIs may turn buyers if the US bond yields and US dollar index correct from here on, which can be possible only if the Fed considers pause in rate hike cycle in upcoming policy meetings.

On the contrary, domestic institutional investors compensated the FII outflow by buying shares to the tune of over Rs 25,000 crore in August. They, in fact, have provided great support to the market.

Technical View

The Nifty50 has taken a good support at 19,250-19,200 levels in last several days, which is expected to be sacrosanct support going ahead too, as breaking of the same can drag it down to 19,000-18,900 levels.

The index has formed bullish candlestick pattern which resembles Bullish Engulfing kind of pattern formation on the daily charts, raising hopes for further rally in coming sessions, while on the weekly basis, the index has also formed green candle after Inverted Hammer pattern in previous week, which generally considers as a trend reversal pattern, which came true in the passing week. Hence, the 19,450-19,500 area is crucial next week for further recovery and if the index surpasses and sustains above 19,650 mark in coming days then can raise confidence among participants about further positive momentum towards 19,800, but till then rangebound activity will continue.

“Nifty has managed to hold 19,200 despite multiple attempts of breakdown in the last three weeks and that may help the bulls to reclaim the lost ground ahead. However, it would be early to say that the trend has reversed until we decisively cross and sustain 19,650 levels,” Ajit Mishra, SVP – Technical Research at Religare Broking said.

F&O Cues

The Option data indicated that 19,500-19,600 is expected to be resistance area in coming days, with critical support at 19,300-19,200 levels.

As per Options data, the maximum Call open interest was seen at 19,600 strike, followed by 19,500 strike, with meaningful Call writing at same strikes in same sequence, whereas the maximum Put open interest was at 19,300 strike, followed by 19,400 and 19,200 strikes, with writing at 19,300 strike, then 19,400 strike.

“Short covering at 19,500 strike in the coming days is likely to push the index even higher,” Ashwin Ramani, derivatives & technical analyst at SAMCO Securities said.

India VIX

The falling volatility also gave more comfort for bulls in the week. Hence, the volatility below 12 levels may keep the market stable and lower the possibility of major market correction going ahead, experts said.

India VIX, which measures the expected volatility in the Nifty50 for next 30 days, dropped by 5.8 percent during the week to 11.36, down from 12.06 levels.

IPO

The primary market will remain active in the coming week as well, with three companies in the mainboard segment launching their IPOs worth Rs 1,350 crore. Stainless steel-based products maker Ratnaveer Precision Engineering will open its public issue during September 4-6, with a price band of Rs 93-98 per share and the bidding for healthcare services provider Jupiter Life Line Hospitals, the biggest among three IPOs, will take place during September 6-8, with a price band of Rs 695-735 per share.

The EMS public issue is likely on September 8 to raise around Rs 320 crore, while Vishnu Prakash R Punglia will list on the bourses on September 5.

In the SME segment, Mumbai-based bulk packaging solutions provider Kahan Packaging will open its Rs 5.76-crore IPO for subscription during September 6-8, while there will be three listings next week with Sahaj Fashions debuting on September 6, Mono Pharmacare on September 7, and CPS Shapers on September 8, as per IPO schedule.

Corporate Action

Here are key corporate actions taking place next week:

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